This application claims priority under 35 U.S.C. §119(e) to provisional application number 60/498,889 by Stephan et al. and entitled Portfolio Management Evaluation, filed Aug. 29, 2003, which is hereby incorporated by reference herein.
The present invention relates generally to portfolio management, and particularly to evaluating portfolio management through interviewing an industry expert and analyzing interview data.
As those in the art recognize, portfolio management generally refers to the management of a financial portfolio and can involve managing a portfolio of stocks, bonds, money market funds, currencies or other investments. As such, the portfolio management process applies to such diverse portfolio managers as public and private banks, asset managers, individual families and the like. The portfolio management process involves a number of steps that require regular evaluation to ensure that the process is functioning at a high performance level and as smoothly and cost effectively as possible. Often, portfolio managers rely upon consultants for assistance in identifying areas of needed improvement within the portfolio management process. Usually, a consultant has broad experience with the management process of particular types of portfolios and uses this knowledge to compare the portfolio manager's process to other related portfolio management processes. Based on the consultant's comparison between the portfolio management process being studied and other known related processes, the consultant typically identifies the weaknesses and strengths of the portfolio manager's process and recommends changes where needed to improve the process.
Traditionally, the consulting process requires several meetings with the portfolio manager in order to evaluate the portfolio management process and fully respond to the particular needs and opinions of the portfolio manager. For example, a typical consulting process begins with an initial identification and contact with the portfolio manager. The initial identification can occur in numerous ways that are well-known to those in consulting businesses, such as word of mouth, advertising, searches and the like. Once a contact has been made with a portfolio manager who is seeking assistance from a consultant, a first meeting is setup between the consultant and the portfolio manager.
During the first meeting between the portfolio manager and the consultant, the consultant typically asks the portfolio manager a number of questions about the portfolio management process in an informal manner. During this first question and answer session, the consultant will usually record the answers to the consultant's questions in any one of a variety of ways. The questions asked by the consultant, however, are usually generated specifically for the particular portfolio manager being asked the questions. Thus, the consultant's questions generally do not match the questions that may be asked of other portfolio managers.
After the consultant has collected a sufficient number of answers to the questions posed to the portfolio manager during the first meeting, the consultant takes the gathered information back to the consultant's office to evaluate the information. Typically, the evaluation of a portfolio management process at the consultant's office requires the input of several specialists. After completing the analysis of the portfolio management process, the consultant and the specialists prepare a series of customized reports that identify the strengths and weaknesses of the analyzed portfolio management process. However, the process of analyzing the collected information and preparing reports can take a significant amount of time to complete. Usually this process takes at least several days to finish but can take as long as a week or more.
Once the reports are completed, the consultant then typically arranges a second meeting with the portfolio manager. During the second meeting, the consultant presents the reports and the consultant's evaluation of the portfolio management process to the portfolio manger. During the presentation, the consultant usually identifies to the portfolio manager the strengths and weaknesses of the portfolio management process. In addition, the consultant may discuss with the portfolio manager possible solutions for improving the identified weaknesses. In the case where the consultant also represents a solution provider, the consultant may use this meeting to discuss specific solutions available from the solution provider. Thus, the consultant's second meeting with the portfolio manager may also serve a secondary purpose of providing an opportunity to sell additional services to the portfolio manager.
Although the consulting process described above is widely used by consultants in the consulting business, several problems exist with this process. One problem is the lack of involvement by the portfolio manager in the evaluation process and the time delay between the first meeting (data collecting) and the second meeting (reporting). Because the portfolio manager is not involved in the evaluation and preparation of the reports, the reports that are presented during the second meeting often lack credibility. This situation is compounded by the time delay required to analyze the portfolio manager's data and prepare the reports at the consultant's office. As a result, portfolio managers sometimes perceive the consultant's reports to be artificial and generic. Moreover, when the consultant also represents a service provider, the portfolio manager may be highly skeptical of the consultant's reports, further perceiving the reports as contrived and biased towards the solutions offered by the consultant. Although those perceptions are often inaccurate and unfair to the amount of work invested by the consultant, the lack of portfolio manager involvement and the time delays make these perceptions unavoidable and all too frequent.
Another problem that often occurs is miscommunication between the consultant and the portfolio manager. Because of the time delay between the first and second meetings with the portfolio manager, the consultant usually does not discover possible miscommunications until after the analysis is complete and the reports are presented during the second meeting. Unfortunately, sometimes the analysis and reports turn out to be unhelpful because either the consultant did not understand the portfolio manager's answers to the questions or the portfolio manager did not understand the questions. In any event, because the reports do not accurately reflect the portfolio management process, the portfolio manager is understandably dissatisfied with the consultant's efforts. As a result, the consultant loses an opportunity with the portfolio manager or the consultant must go back to the consultant's office to re-analyze the portfolio management process and prepare new reports. If the portfolio manager gives the consultant another opportunity to correct the problems with the reports, even more time is required with more analysis, reporting and meetings with the portfolio manager. This additional, time delay makes the consulting process inefficient and less effective.
In some situations, the portfolio manager may also seemingly change his/her mind about certain questions between the first and second meeting. This problem usually does not reflect an actual change in the portfolio manager's position (although sometimes it does). Instead, this problem is more reflective of the portfolio manager's uninvolvement in the evaluation process. Oftentimes, when the portfolio manager sees the reports that have been generated based on the answers provided. The portfolio manager decides that the previously provided answers were inaccurate or inexact. Although this may appear to be an inconsistency in the portfolio manager's positions, this is a common human technique for optimizing the results of an analysis and arriving at the most accurate results. However, because of the additional time that is required to re-analyze new answers and prepare new reports, changes such as this can be time consuming and expensive.
Consultants also do not have an effective way to incorporate the level of importance that a portfolio manager attributes to particular parts of the portfolio management process. Instead, consultants usually evaluate all parts of the portfolio management process equally, regardless of the importance of each part to the portfolio manager. As a result, the reports are sometimes unresponsive to the actual needs of the portfolio manager. This problem is compounded by the lack of involvement by the portfolio manager in the evaluation and time delays, both of which have been previously discussed.
Another problem is the unstructured nature of the question-answer session that occurs during the first meeting referred to above. Because the questions asked by the consultant serve the singular purpose of collecting data for reporting back to the portfolio manager, the collected data has limited usefulness beyond this singular purpose. Thus, since the questions that are asked usually do not match the questions asked of other portfolio managers, it would be cumbersome and expensive to compare the collected data from different portfolio managers. Another problem is that a consultant sometimes discovers during the first question and answer meeting that the consultant does not have the qualifications for a particular specialty needed by the portfolio manager. When this occurs, the consultant typically tries to identify another consultant with the qualifications needed by the portfolio manager. However, when this occurs, the first meeting with the first consultant is usually wasted because the second consultant must start over with his/her own questions during the new first meeting.
Because of these and other numerous problems, a better consulting process is needed for portfolio management.